What happens when we click "Apply prefab" if they're nested?

Hi, I'm confusing about nested prefab's saving problem. For example, I have a character with a gun and a knife like this.

--Character(prefab)
--|--Gun(prefab)
--|--Knife

Say I saved character and gun as separately prefabs, then set gun.ammo + 1 and character.hp - 1.
Then is there any difference between clicking "Apply prefab" on character and gun?

 

There is currently no concept of nested prefabs in unity. If I recall correctly, pressing apply in a child, will actually apply the highest level prefab. Any children that are prefabs, lose their connections and become part of the higher one.

 

That's correct. I really wish Unity had a feature for nested prefabs

 

Thanks @zombiegorilla
No wonder I lost prefabs when applied them sometimes. What an error prone design

 

They're prototyping nested prefabs now! Check out the roadmap.

From what was said at last Unity, Unity's committed to making it, but the timeline is still not certain.